Arvind Agarwal, Bareily V. Dy. Commissioner of Income Tax, Circle-I, Bareily

ITA 570/LKW/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9767 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 11-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAY NATH VERMA
• Assessee Lawyers: YOGESH AGRAWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Fair market value
• Section: 143(3); 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 570/LKW/2017 ASSESSMENT YEAR: 2013 - 14 ARVIND AGARWAL 65, RADHEY SHYAM ENCLAVE CIVIL LINES, BAREILLY V. DCIT CIRCLE I BAREILLY T AN /PAN : AALPA9766C (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI YOGESH AGRAWAL, ADVOCATE RESPONDENT BY: SHRI JAY NATH VERMA, D.R. DATE OF HEARING: 06 09 201 8 DATE OF PRONOUNCEMENT: 19 0 9 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A), BAREILLY DATED 11/7/2017 AS PER FOLLOWING GROUNDS OF APPEAL: - 1 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS), BAREILLY [HERE - IN - AFTER REFERR ED TO AS THE LD. CIT (A)'S] GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.42,23,003/ - MADE ON ACCOUNT OF LONG TERM CAPITAL GAINS BY PARTIALLY DISALLOWING THE DEDUCTION SO CLAIMED U/S 54F OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE TRUE FACTS ON WHOLLY MISCONSTRUED NOTIONS, CONJECTURES AND SURMISES. 2 . IN CONFORMING THE ADDITION OF RS.42,23,003/ - THE LD. CIT (A)'S CHOSE TO IGNORE OR RATHER FAILED TO APPRECIATE THE FACT AND THE SETTLED LAW ON THIS ISSUE THAT THE DEDUCTION SO CLAIMED WAS U/S ITA NO.570/LKW/2017 PAGE 2 OF 7 54F READ WITH SEC.45 OF THE ACT AND WHICH REQUIRES THAT THE NET CONSIDERATION IS REQUIRED TO BE INVESTED WHICH HAS BEEN DONE AND THUS THE DEDUCTION SHOULD BE ALLOWED KEEPING IN MIND THE ACTUAL SALE CONSIDERATION RECEIVED AND NOT DEEMED VALUE AS PE R SEC. 50C. 3 . THAT WHILE CONFORMING THE ADDITION THE LD. CIT (A)'S GROSSLY ERRED IN LAW AND IN NOT APPRECIATING THE SETTLED VIEW THAT DEEMING FICTION IN SEC. 50C IS TO BE APPLIED ONLY TO SEC. 48 AND THE WORDS FULL VALUE OF CONSIDERATION AS MENTIONED IN OTHER PROVISIONS OF THE ACT ARE NOT GOVERNED BY THE MEANING OF THESE WORDS AS MENTIONED IN SEC. 50C THUS MEANING OF FULL VALUE OF CONSIDERATION AS REFERRED TO IN EXPLANATION TO SEC, 54F(1) IS NOT GOVERNED BY THE MEANING OF THE WORDS 'FULL VALUE OF CONSIDERATION ' AS MENTIONED IN SEC. 50C. SECTION 54F IS AN INDEPENDENT SECTION AS HAS ALSO BEEN PROVIDED IN THE CHARGING SECTION 45 AND THUS AS THE COST OF THE NEW ASSET IS MORE THAN THE NET CONSIDERATION THE WHOLE OF THE CAPITA! GAINS IS NOT CHARGEABLE TO TAX AND THUS AS THE ACTION OF THE LD. CIT (A)'S IS UNJUST, ARBITRARY AND AGAINST THE SETTLED PRINCIPLES OF LAW THE SAME MAY KINDLY BE ORDERED TO BE QUASHED AND RELIEF GRANTED ACCORDINGLY. 4 . THE LD. CIT (A)'S FURTHER ERRED ON FACTS AND IN LAW IN IGNORING THE OBJECTIONS F ILED AGAINST THE DEPARTMENTAL VALUATION OFFICERS REPORT VALUING THE PROPERTY AT RS.1,13,46,300/ - AGAINST THE ACTUAL SALE CONSIDERATION OF RS.69,39,163/ - WITHOUT FORMATION OF BELIEF REGARDING VARIANCE WITH ITS FAIR MARKET VALUE AND FURTHER IGNORING THE DOCU MENTARY EVIDENCES AND PECULIAR CIRCUMSTANCES DUE TO WHICH THE PROPERTY WAS SOLD AT LOW RATES AND THUS THE ADDITION SO SUSTAINED EVEN ON THIS GROUND IS NOT SUSTAINABLE AND LIABLE TO BE STRUCK DOWN. 5 . IN CONFORMING THE ADDITION THE LD. CIT (A)'S AGAIN ERRED ON FACTS IN NOT BEEN GUIDED BY THE COMPARABLE SALE INSTANCES FILED BY THE APPELLANT OF TWO PLOTS SOLD IN THE IMMEDIATE VICINITY ITA NO.570/LKW/2017 PAGE 3 OF 7 WHICH WERE EVEN LOWER THAN THE APPELLANT AND THUS NON CONSIDERATION OF THE SAME HAS RESULTED IN AN ARBITRARY AND BIASED ORDER WHIC H IS NOT AT ALL SUSTAINABLE IN LAW AND NEEDS TO BE QUASHED. 6 . THE ADDITION SO SUSTAINED IS VERY HIGHLY EXCESSIVE, CONTRARY TO FACTS, LAWS AND PRINCIPLES OF NATURAL JUSTICE AND FAIR - PLAY AND THUS MAY KINDLY BE ORDERED TO BE QUASHED/ANNULLED. 2 . THE BRIEF FACTS I N THIS CASE ARE THAT THE ASSESSEE SOLD AN AGRICULTURAL LAND (CAPITAL ASSET BEING SITUATED WITHIN 8 KMS FROM THE MUNICIPAL LIMIT OF B AREILLY) FOR A CONSIDERATION OF RS. 69,39,163/ - VALUE OF WHICH AS PER CIRCLE RATE WAS RS.1,62,09,000 / - . THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54F OF THE ACT AMOUNTING TO RS. 69,39,163/ - (ENTIRE NET SALES CONSIDERATION). THE INVESTMENT MADE IN THE HOUSE PROPERTY AS CLAIMED UNDER SECTION 54F WAS EXAMINED BY THE ASSESSING OFFICER. THE ASSESSEE WAS REQUIRED TO EXPLAIN WHY THE CAPITAL GAIN ON ENTIRE CONSIDERATION OF RS.1,62,09,000/ - AS PER PROVISIONS OF SECTION 50C OF THE ACT MAY NOT BE CHARGED. THE ASSESSEE TOOK PLEA THAT WHATEVER SALE CONSIDERATION WAS RECEIVED BY HIM, HAS BEEN INVESTED UNDER SECTION 54F AND PROVISIONS OF SECT ION 50C ARE NOT ATTRACTED IN HIS CASE. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT AND ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.62,30,430/ - AS AGAINST RETURNED INCOME OF RS.20,07,430/ - . 3 . THE LD. CIT(A), FOR THE REA SONS MENTIONED IN HIS ORDER, HAS UPHELD THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 50C OF THE ACT. BEING FURTHER AGGRIEVED, ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4 . AT THE TIME OF HEARING, LD. A.R. OF THE ASSESSEE REITERATED THE SUBMISSIO NS PLACED BEFORE THE SUBORDINATE AUTHORITIES AND VEHEMENTLY ITA NO.570/LKW/2017 PAGE 4 OF 7 ARGUED THAT HIS CASE IS COVERED WITHIN THE AMBIT OF PROVISIONS OF SECTION 54F , SINCE THE ENTIRE NET CONSIDERATION AS DEFINED UNDER SECTION 54F HAS BEEN INVESTED IN PURCHASING THE HOUSE PROPERTY. ASSESSEE IS SUPPOSED TO INVEST NET CONSIDERATION AND NOTHING BEYOND THAT, WHICH IS THE MANDATE OF PROVISIONS OF SECTION 54F OF THE ACT . I F THE DEEMING PROVISION OF SECTION 50C IS APPLIED IN THIS CASE, THE DOCTRINE OF IMPASSABILITY OF PERFORMANCE SHALL COM E INTO PLAY, SINCE ASSESSEE CANNOT PERFORM WHAT IT HAS NOT ACTUALLY RECEIVED; MEANING THEREBY IF THE DEEMING NET CONSIDERATION IS MORE THA N WHAT IS ACTUAL NET CONSIDERATION RECEIVED BY THE ASSESSEE, ASSESSEE CAN ONLY INVEST ACTUAL NET CONSIDERATION AND NOT DEEMING NET CONSIDERATION. LD. A.R. OF THE ASSESSEE IN SUPPORT OF HIS CONTENTIONS RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS, THE COPIES OF WHICH ARE PLACED IN THE PAPER BOOK: - ( 1 ) I TAT JAIPUR BENCH IN THE CASE OF ITO VS. RAJ KUMAR PARASHAR IN ITA NO. 1 1 L/JP/2016 , ORDER DATED 28 - 09 - 2017 ( 2 ) ITAT JAIPUR BENCH IN THE CASE OF PRAKASH KARNAWAT VS. ITO IN ITA NO. 364/JP/2011 , ORDER DATED 18 - 11 - 2011 ( 3 ) ITAT JAIPUR BENCH IN THE CASE OF CYAN CHAND BATRA VS. ITO REPORTED IN 45 DTR 41 , ORDER DATED 13 - 08 - 2010 ( 4 ) HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. SMT. NILOFER I. SINGH REPORTED IN 309 1TR 233 , ORDER DATED 27 - 08 - 2008 ( 5 ) LUCKNOW BENCH OF ITAT IN THE CASE OF ANANT CHETAN AGARWAL VS. DCIT IN ITA NO. 571/LKW/2017, ORDER DATED 31/8/2017. 5 . THE LD. D.R., ON THE OTHER HAND, AR GUED THAT THE PURPOSE OF SECTION 50C IS THAT THERE SHOULD NOT BE ANY LOSS TO THE REVENUE AND IF ANY ASSESSEE TRIES TO UNDERVALUE THE PRICE OF LONG TERM CAPITAL ASSET, THAT MAY BE SCRUTINIZED AND CAREFULLY LOOKED INTO BY THE CONCERNED ITA NO.570/LKW/2017 PAGE 5 OF 7 AUTHORITY AS PROVIDED IN SECTION 50C AND TO SAFEGUARD THE INTEREST OF THE REVENUE, SECTION 50C HAS BEEN BROUGHT INTO STATUTE. THE LD. D.R. ALSO RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS AND WE FIND THAT SIMIL AR ISSUE HAD COME UP BEFORE US FOR CONSIDERATION IN ITA NO.571/LKW/2017 WHEREIN WE HAVE HELD AS FOLLOWS: - 7 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE CONTENTIONS OF THE PARTIES. ON A PERUSAL OF PROVISIONS OF SECTION 50C WE FIND THAT IT SPECIFICALLY MENTIONS THAT FOR THE PURPOSE OF SECTION 48 VALUE ADOPTED WAS ASSESSED FOR THE PURPOSE OF STAMP DUTY SHALL BE DEEMED TO BE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER. MEANING THEREBY, DEEMING FICTION CREATED IN SECTION 50C IS LIMITED ONLY TO THE EXTENT AND FOR THE PURPOSE OF SECTION 48 AND THIS DEEMING FICTION CANNOT BE EXTENDED OR INTERPRETED AS MEANT FOR THE PURPOSE OF OTHER PROVISIONS OF THE ACT INCLUDING SECTION 54F. PROVISIONS OF SECTION 45 IS THE CHARGING SECTION OF CAP ITAL GAIN WHEREIN ITSELF CONDITIONS FALLING UNDER SECTION 54F IS EXEMPTED FROM CHARGEABILITY AND SECTION 48 PROVIDES FOR MODE OF COMPUTATION IN CASE OF CAPITAL GAINS. PROVISIONS OF SECTION 50C CAN ONLY BE APPLIED TO THE EXTENT OF SECTION 48 AND NOT BEYOND THAT. IF PROVISIONS OF SECTION 50C ARE INCORPORATED AS SUBMITTED BY THE LD. D.R. TO PROTECT THE INTEREST OF THE REVENUE. SIMILARLY SECTION 54F IS THERE TO PROTECT THE INTEREST OF THE ASSESSEE SUBJECT TO THE CONDITIONS SPECIFIED THEREIN. IF ONE IS ALLOW ED TO ENCROACH UPON THE TERRITORY OF OTHER, THEN EITHER OF THE PROVISIONS BECOMES REDUNDANT WHICH IS DEFINITELY NOT THE INTENTION OF THE LEGISLATURE. GIVEN THE FACTS AND CIRCUMSTANCES OF EVERY CASE, SECTION 50C TO BE APPLIED SEPARATELY AND AGAIN IN ANOTHE R SET OF FACTS AND CIRCUMSTANCES WHERE THERE IS APPLICABILITY OF SECTION 54F, THAT IS TO BE APPLIED. SANCTITY, AS WE OBSERVED, WITH REGARD TO SECTION 54F IS CONCERNED, WHETHER ENTIRE NET ITA NO.570/LKW/2017 PAGE 6 OF 7 CONSIDERATION RECEIVED BY THE ASSESSEE HAS BEEN UTILIZED OR NOT. AS SESSEE CANNOT BE EXCEPTED TO DO MORE THAN WHATEVER HE HAS RECEIVED; MEANING THEREBY ASSESSEE CAN INVEST THAT AMOUNT ONLY WHICH HE HAS ACTUALLY PHYSICALLY RECEIVED FROM TRANSFER OF LONG TERM CAPITAL ASSET OTHER THAN RESIDENTIAL HOUSE AS PROVIDED UNDER SECTI ON 54F OF THE ACT. THERE IS A DOCTRINE OF IMPOSSIBILITY OF PERFORMANCE WHEREIN IT IS ONLY TO THE EXTENT OF FUNDS AVAILABLE WITH THE ASSESSEE THAT HE CAN BE EXPECTED TO INVEST. THIS VIEW HAS BEEN ADOPTED BY VARIOUS JUDICIAL PRONOUNCEMENTS LIKE IN THE CASE OF NATIONAL AVIATION CO. OF INDIA VS. DCIT [2011] 137 TTJ 662 BY MUMBAI BENCH OF THE TRIBUNAL AND IN THE CASE OF JAGDISH MALPANI VS. ACIT [2005] 94 TTJ 321 BY INDORE BENCH OF THE TRIBUNAL. NOW THE CONTENTION OF THE ASSESSEE IS THAT ENTIRE NET CONSIDERATI ON HAS BEEN INVESTED IN THE NEW HOUSE PROPERTY, THEREFORE, HE WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 54F AND ASSESSEE IS NOT LIABLE TO PAY ANY CAPITAL GAIN TAX. ON PERUSAL OF SECTION 54F, WHAT IS, THEREFORE, RELEVANT IS THE INVESTMENT OF THE NET CO NSIDERATION IN RESPECT OF ORIGINAL ASSET WHICH HAS BEEN TRANSFERRED AND WHETHER NET CONSIDERATION IS FULLY INVESTED IN THE NEW ASSET. THE NET CONSIDERATION AS DETERMINED UNDER SECTION 50C BASED ON THE STAMP DUTY AUTHORITY VALUATION IS NOT A CONSIDERATION WHICH HAS BEEN RECEIVED BY OR HAS ACCRUED TO THE ASSESSEE. THE LD. D.R. DID NOT PLACE RELIANCE ON THE PROVISO TO SECTION 54F. IT IS, THEREFORE, CLEAR THAT THE ENTIRE NET CONSIDERATION AND WHATEVER HAS PHYSICALLY RECEIVED AND ACCRUED TO THE ASSESSEE, THE ENTIRE AMOUNT HAS BEEN INVESTED AND IN SUCH CIRCUMSTANCES, PROVISIONS OF SECTION 54F(1)(A) ARE COMPLIED WITH BY THE ASSESSEE AND, THEREFORE, ASSESSEE BECOMES ELIGIBLE FOR DEDUCTION IN RESPECT OF WHOLE OF THE CAPITAL GAINS TO BE COMPUTED UNDER SECTION 45 RE AD WITH SECTION 48 AND 54F(1)(A) OF THE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.570/LKW/2017 PAGE 7 OF 7 7 . RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 / 0 9 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED: 19 TH SEPTEMBER , 201 8 JJ: 0609 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR